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Tuesday, 3 July 2012

Middle East and Asia to stoke sukuk growth

KUALA LUMPUR: Global sukuk market growth will likely stem from the Middle East and Asia as these burgeoning markets attract liquidity and provide opportunities for funding.

HSBC Amanah (M) Bhdchief executive officer Rafe Haneef said the financial unease in Europe would continue to deflect funds in the direction of the Middle East and Asia, where there are opportunities for funding growth through sukuk.

“The global liquidity pool is moving away from more risky markets to safer, more growth-oriented markets. So you will find that the liquidity will now chase asset growth in the Middle East and Asia,” he said after launching the HSBC Amanah City Centre branch at Wisma UOA II, Kuala Lumpur.

HSBC Amanah is the global Islamic financial services division of the HSBC Group.

He added that the liquidity shift to the Middle East and Asia had created a price tension.

“Pricing has become more attractive and people are going out to issuesukuk,” Rafe said, adding that there was market talk of mega projects in the pipeline being sukuk-funded.

“What we hear in the market is that there are bigger deals than the RM6bil coal-fired power plant project in Tanjung Bin,” he said adding that about RM3.2bil of the power plant had been funded through sukuk.

He said the mega projects would be in Malaysia as well as the Middle East. “There are significant developments in the Middle East and it is believed that all of them will be funded through sukuk.”

The global sukuk market size hit US$20.5bil for the first half of this year, up 36.7% from US$15bil as at June 2011.

The sukuk market is then on target to reach US$44bil at year-end, encouraged by more sukuk issuance for growing markets. It closed last year at US$37bil.

Rafe added: “(The sukuk market is) already around the halfway-mark. By year-end, it should be comfortably close to US$44bil.”

Moving forward, he said that HSBC hoped to maintain its 35% market share of the global sukuk market, which now amounted to almost US$7.2bil.

HSBC Malaysia would also be launching its Islamic overdraft facility this year, while it continues to refine its full suite of financial products.

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